Hey guys, it's sasha there's been a lot of panic in the stock market in the last few days, and a lot of people are telling you that you need to sell weenie. Babies are institutional, paper-handing sissies who follow the trends because they care more about making fees and commissions than about actually providing returns. Your portfolio is down you're, seeing a lot of red. All grey stocks are down 50 or more, and then you remember that inflation is still running riot, probably will increase.

Further interest rates are probably going to start increasing sooner rather than later, and now the media is also suggesting we might have a massive war starting soon. As well being concerned in the situation is very natural, in fact, it would be weird if you weren't, but selling out of your portfolio in this sort of scenario, is mathematically, a really bad decision and i'm going to explain why that's the way the market works. It goes up and down so don't be a weenie baby. Take advantage of dips, never squander the dips, stop worrying about falling knives.

You could be catching falling handles anyway and keep in mind how the weenie babies screw and manipulate this market now. Remember that something being statistically a bad decision does not mean it definitely won't work. It just means that, over the long term, if you took the exact same decision in the same circumstances on average, it is a losing decision and i will explain the exact math to you. But before i do, i first want to talk about a winning decision of opening a new investing account with lightyear who happened to be the sponsor of today's video, because if you are not an impulsive, paper-handed weenie baby, you might want to buy stocks rather than sell Them in a moment of panic and if you live in the uk, the cheapest platform for buying us stocks is lightyear, which is the only completely free investing platform for up to 000 pounds per month, no platform fees, no trade fees and no foreign exchange fees.

Unlike every other platform like here are a brand new investing platform and instead of watching a 12 minute video from some random guy on youtube to understand why tesla fell yesterday, you can instead read the one sentence: lightning update on the app instead, if you live in The uk and you want to try out the only platform that lets you invest in us stocks completely for free. You can even get a 10 bonus if you use my link in the description to sign up and deposit at least one pound, so statistically selling your stocks when you're already down, is a bad idea. The problem is that investors are driven so much by impulse. Greed and confirmation bias that when we see a risky move pay off, we applaud the move and glorify the person who made it.

We didn't question whether it was the right move in the first place. The fact that it happened to work out automatically confirms in people's minds that it was the right move. We are driven by the survival bias where we only noticed the moves that paid off, and we don't see the many many more. That categorically did not.

First up. Let's talk about some basic historical examples: we are now about 10 down from where the stock market peak was three weeks ago, more, like maybe 12, and if we are at the onset of a major financial crash selling out, could pay off. Because if you sell your position at 10 down and then go and buy them, when the stock falls, another 30 percent, you would be making bank, but the problem is that historically, the likelihood of the market dropping 40 percent from the top is exceptionally low. It could happen, but it's unlikely in the last 50 years it has happened precisely three times in 1973, the dot-com crash in 2000 and in the financial crash in 2007-2009, but in those same 50 years the stock market fell by 10 by over 10, more than a Dozen times and the market didn't do a full-on market crash on those occasions.

So if you sold your position in any of those other cases, you'll be sat there waiting for the crash that, maybe you think is going to happen to maybe go and buy back in at a 20 to 30 percent lower price. But instead you sit there. You miss the bounce and the stocks are 50 up before you realize that you were completely wrong, and i know i know this time is different. This time we have uniquely really bad circumstances which mean it's definitely going to be worse and it's definitely going to be completely unlike any other scenario.

But in 1990 we had the first iraq war, for example, and in 1987 we had the biggest ever one day stock market drop where the s p 500 fell over 20 on black monday. The last time we had runaway inflation with interest rates going up to 20. In 1980, the stock market only fell by 30, didn't even reach the 40 or 50 mark and even the crash recently in march 2020, when the world was in a slightly bigger state of panic than today, with the onset of an unknown scary pandemic, the stock market Didn't make it to the 40 mark, then either, so the chances are roughly six to one that the stock market will go and have a massive crash after you decide to sell at roughly this point. If you go and sell out of your stocks, but 85 percent of the time, if you choose to sell when the market is 10 to 15 down, that means you will have sold roughly at the bottom and scored a massive l missing the rebound so 85 of The time you are going to lose the other 15, you will be right and the market will keep falling, maybe in some cases the worst cases, another 30 percent or so - and even if you time it perfectly and by right at the bottom, which by the way Is completely impossible? You will have made a 50 return on that move, because you will have gone from roughly 60 of the previous peak if you bought at the bottom back up to 90, which is where we are today and if you're wrong, which will be 85 percent of the Time you are late to the bounds and, if you're only late by - let's say 10, so you realize you're wrong, really quickly.

You've already lost because 85, which is the likelihood times 10, is more than 15 percent of the likelihood of being right times. The 50 gain. But that's not even the whole story, because it's actually much worse than that, because when you sell out of your positions, you also have to pay tax. If you have held your positions for a long time, you will have to pay capital gains tax, and presumably a lot of your value in stocks that you've held for a particularly long time is going to be capital gains.

So when you choose to sell you'll have to give 20 of those gains over to the tax man. So when you buy back in you're only going to have 80 of those gains to buy stocks again when you are going back into the market. So with those gains you will lose money, even if the stock market falls. Another 20 percent because you've given 20 away when you sold and if you live in the us and sell positions within 12 months of opening them, which i think is going to be the situation for a lot of retail investors.

At the moment. That tax rate is going to be more like 50 or whatever. It is for you, so good luck with trying to recoup that tax by waiting for the market to drop sufficiently for you to even break even and selling, is also bad. If your positions are carrying a loss, if you sell a loss-making position, you get to bank a capital gains loss which you can then offset against capital gains, except if you go and buy back into the same stock within 30 days in the us, the wash sale Rule means that buying back in within 30 days, disqualifies your capital loss capital gains loss from offsetting your capital gains in the uk.

The tax man considers your position as though you've never even sold the thing in the first place, so pretty much the same effect and if you go and buy back in on the way up, you take a loss on missing the rebound and the number of shares You hold drops and you also get to get whacked with the tax penalty, to make it even worse. So take your pick, you can gamble and pretend that you know what's going to happen because you know you had a late night epiphany with a white board or you can play the numbers instead and win in the long run. If you choose to gamble, you might win good for you, but i am not here to gamble and i think for most people it is actually a really bad idea. I'm here to make consistent, robust, long-term investing returns and to get those returns.

I don't need to take my chances with timing. The market, the much smarter thing to do - is to buy shares when the sales are on, which is now. This sounds ridiculously obvious, but panic is a funny thing. You thought that a company was really good had really great prospects was an amazing buy at 170, but then, three months later, you think that same company is a bad buy at eighty dollars.

Even though, absolutely nothing changed in your assessment of the company's fundamentals, there hasn't been any news about the company or any financial changes. Companies dropping in value despite their fundamentals, is a very different thing to companies dropping in value because of a change in the fundamentals and if a company has lost 60 of its value, but your valuation of that company hasn't changed when you reviewed it. That is one heck of an opportunity to buy stock, because if you are right, you are getting a much much bigger return on investment on the money being put in at this moment, while everyone else is panicking and selling their stocks instead and if you're wrong. The problem isn't with the buying the problem, isn't with the timing.

The problem is going to be with your valuation. I hope you found this video useful. If you have, please don't forget to smash the like button for the youtube algorithm. Thank you so much for watching.

I really really appreciate it and, as always i'll see you guys later, you.